Zim to average -1,2pc GDP growth
ZIMBABWE will remain in recession averaging real Gross Domestic Product (GDP) of -1,2 percent over the next three years, a regional think tank has said.
In a quarterly update on Zimbabwe, NKC African Economics said the southern African nation faces a set of complex economic issues, as political fragilities have seen the economy come undone again.
“Widespread cash shortages hamper economic activity without hard cash Zimbabweans aren’t fully able to engage in, and pay for, basic day-to-day activities. Locals therefore have little choice but to resort to the black market,” said NKC.
The International Monetary Fund regards Zimbabwe as the second-largest informal economy in the world with around 61 percent of all activity conducted outside the formal sector. “Zimbabwe underperforms woefully compared to the Southern African median as well as the overall African median in most of the indicators included in this analysis, amid ongoing political and policy uncertainty”.
NKC said the least favourable comparisons relate to economic growth, fiscal finances and inflation and import cover.
“We forecast that Zimbabwe will average a real GDP growth rate of -1,2 percent per-annum during 2019-21. External factors have placed additional pressure on the economy, which was already weak to begin with, in 2019,” the think tank said.
NKC said growth assumptions underpinning the 2020 National Budget were way too optimistic, and Zimbabwe would continue to register a budget deficit over the medium term. “While Zimbabweans have once again grown accustomed to elevated inflation readings, confidence in the country’s monetary system remains low. A big reason for this is due to severe foreign exchange shortages that have precipitated a large informal economy.
“The inflation outlook deteriorated considerably in 2019, amid acute shortages of basic consumer goods, and 2020 is not looking any better,” said NKC.
NKC said it projects the country’s inflation to average 211 percent per annum over 2019-21, compared to a peer median inflation level of 4,6 percent per annum for both Southern Africa and Africa.
“Zimbabwe’s comparative performance in relation to import cover remains an area of ongoing concern. International reserves are at critically low levels, with an average of less than a month’s import cover over the forecast period.
“This level is lower than the peer median projection of above four months of import cover, and also lower than the internationally accepted benchmark of at least three months,” NKC said.